Academic Conference on Good Business

Executive Greed and the Moderating Role of CSR Policy on Moral Outrage

Why do executives of some firms attract more public moral judgment than others do for similar moral transgressions? Despite the potentially severe consequences of moral judgment for firms and managerial careers, this question has so far received scant research attention. We hypothesize that moral standards to which executives are held are more stringent if their firms are perceived as “good”. This holds because in such a context, a moral transgression by executives gives rise to an inconsistency in moral conduct and induces the perception of hypocrisy. Using data of large listed U.S. companies, we test the hypothesis that CEOs of firms with high scores in corporate philanthropy are more likely to receive negative media attention when their pay contract violates distributive justice norms. Our evidence is a rmative. We also argue and show that pro-social conduct along moral domains unrelated to the transgression (e.g., diversity and environment) and pro-social conduct that raises doubts about the severity of the transgression help to license the transgression and reduce the likelihood of public outcry. Finally, we find evidence that executives seem to care for morally consistent conduct since public judgment only triggers a significant subsequent drop in excessive pay in situations characterized by hypocrisy.